While many market pundits have focused on the prospect of a massive wall built between the U.S. and Mexico as the largest risk facing the country’s economy, Mexico has even larger issues to deal with.
The Trump administration’s treatment of the country will certainly impact things, but other problems like weak GDP growth, central banking questions, and how to manage its currency will take center stage.
Central bankers in our neighbors to the south may even need to cut interest rates. From Bloomberg:
Perhaps the last thing a country with anemic growth needs is higher interest rates, but the central bank may not be able to avoid tightening. Inflation is expected to run well above the 4 percent top end of the institution’s target throughout 2017, according to forecasts from Banco Bilbao Vizcaya Argentaria SA, Grupo Financiero Banorte SAB and JPMorgan Chase & Co, as the government moves ahead with plans to raise the price of gasoline by as much as 20 percent in January.
Mexican stocks have been weak as of late. The iShares MSCI Mexico Capped (NYSE:EWW), the largest ETF focused on Mexican equities, is down nearly 17% over the past five years. That anemic performance comes despite big gains in the U.S., Europe, and some areas of Emerging Markets in that same time frame.
To turn things around this year, Mexican regulators will have to tread very carefully.
The iShares MSCI Mexico Capped ETF (NYSE:EWW) was trading at $44.62 per share on Tuesday morning, up $0.65 (+1.48%). Over the past year, EWW has declined -9.40%, versus an +11.56% rise in the benchmark S&P 500 index during the same period.
EWW currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #11 of 20 ETFs in the Latin America ETFs category.